Carrizo Oil & Gas Inc. has agreed to purchase more than 13,000 net acres in the Eagle Ford Shale in a deal valued at about $71.5 million, and it has temporarily moved one of its rigs from the Barnett Shale to the Eagle Ford in order to speed up production.
Paul Boling, CFO of Houston-based Carrizo, told NGI's Shale Daily on Tuesday that the deal reflected a discounted price of $5,500/acre, of which $1,650/acre would be paid up front in cash and the remainder through a drilling carry for the next two to three years.
"This [transaction] will clearly continue to provide further upside in the Eagle Ford play, which is the company's enhanced strategy of getting oilier," Boling said. "We view this as a significant transaction and a sizeable addition to our existing inventory in the Eagle Ford."
The acquisition -- located on a condensate trend in LaSalle County, TX -- brings Carrizo's total leasehold in the Eagle Ford to about 33,000 acres. The company and Boling declined to identify the sellers in the deal, other than to say that it involved a number of different transactions.
"We've already received a lot of positive responses from investors and analysts," Boling said. "They embrace the strategy, and they see that we're continuing to add more and more acreage to this play. The acreage that we've acquired is already derisked, so we expect that we'll be able to drill up all of it."
Carrizo said it has moved a rig, an H&P 332, from the Barnett to the Eagle Ford and is currently drilling the Ivey Ranch 10H site in Dimmit County, TX. The company said the rig will remain in the Eagle Ford until December when a new purpose-built rig can be deployed in its place.
"The new rig is designed more appropriately for drilling in the Eagle Ford," Boling said. Carrizo added in a separate statement that "given the current backlog of wells waiting on completion in the Barnett Shale, the company believes this rig move should have no impact on estimated 2011 Barnett production."
Elsewhere in the Eagle Ford, Carrizo said its newest rig, an H&P Flex 3S, had just arrived and was drilling at its newly acquired RPG project in McMullen County, TX. The company said it now has three rigs working in the Eagle Ford and planned to begin completion work on three wells in LaSalle County at the end of June.
"Although we expect the number of Eagle Ford wells drilled during 2011 to increase above projections due to this rig relocation, uncertainty associated with the timing of well completions and initiation of oil sales precludes the company from increasing its previous guidance for 2011 oil production until a [hydraulic fracturing] schedule is finalized," Carrizo said.
Carrizo also announced progress with operations in the Niobrara (Weld and Morgan counties, CO) and Marcellus (Susquehanna and Wyoming counties, PA) shale plays.
The company said its fourth Niobrara well, Orlando Hill 26-44-8-61, had reached total depth and was being prepared for completion by the end of June. The company then plans to move the rig to drill the Nelson 17-44-9-60 site, all while maintaining one rig in the Niobrara for the rest of the year.
Meanwhile, Carrizo has eight gross wells in the Marcellus awaiting completion. The company said it will begin performing stimulation and completion of a backlog of drilled wells in July. Carrizo also said the first gas sales from Susquehanna County would begin in August after the completion of the 400 MMcf/d Laser PA-NY Gathering Line system, currently being constructed by Laser Northeast Gathering Co. LLC (see Shale Daily, May 20; Feb. 3).
Carrizo said in April it would sell most of its Tier 1 Barnett properties -- about 13,000 acres with 75 gross (58.5 net) wells -- to KKR Natural Resources and Premier Natural Resources for $104 million (see Shale Daily, April 29).